Elon Musk, CEO of Tesla, has found himself embroiled in yet another controversy as a shareholder lawsuit accuses him of engaging in insider trading involving $7.5 billion worth of Tesla stock. The lawsuit, filed by Tesla investor Michael Perry in Delaware Chancery Court, alleges that Musk had inside information about the company’s likely miss on production and delivery numbers when he sold a substantial portion of his shares in 2022.
According to the lawsuit, Musk was aware that Tesla would not meet its fourth-quarter targets for 2022. Despite this knowledge, he proceeded to sell over $7.5 billion in stock, a move which Perry claims was a breach of Musk’s fiduciary duties to the company and its shareholders. The investor asserts that Musk used nonpublic information for personal gain, specifically to finance his acquisition of the social media platform X, formerly known as Twitter.
Perry’s complaint highlights that Musk profited from “his misconduct and his exploitation of material and adverse inside information.” The lawsuit demands that Musk return the profits from these trades to Tesla. Furthermore, Perry accuses Tesla’s directors of failing to ensure that Musk adhered to legal obligations regarding stock sales and public statements about the company’s financial health.
The controversy centers around Musk’s public statements earlier in 2022, where he claimed that Tesla experienced “excellent demand” and expected to sell every car it produced “as far into the future as we can see.” However, by November 2022, Musk learned that Tesla would miss its fourth-quarter targets. Before this information was officially disclosed, he sold shares worth $7.53 billion.
This lawsuit adds to the ongoing scrutiny of Musk’s stock transactions and public statements. It coincides with Musk agreeing to a third round of questioning by the US Securities and Exchange Commission (SEC) as part of an investigation into his Twitter acquisition and whether he properly disclosed his initial stake in the company.
The latest legal challenge highlights the persistent disputes surrounding Musk’s financial activities and their impact on Tesla and its shareholders. The outcome of this case could have significant implications for Musk and the governance practices at Tesla.
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